How Division of Labor Increases Production


According to Adam Smith and his book, The Wealth of Nations, when a process, whether it be a service or the creation of a good, is broken down into separate tasks to be completed by distinct individuals, a greater output can be expected. If you take the shoe example in the previous post on this topic, one shoemaker can only produce a marginal amount of shoes per day by himself. If the individual tasks and processes that went into creating each pair of shoes were divided between multiple individuals though, that number can be compounded greatly. In The Wealth of Nations, an example of making pins was given. Smith contends that while a group of men performing distinct tasks in an effort to manufacture pins can create 48,000 pins per day, if each man were to take on every task necessary to make pins by themselves, they'd only be able to make 10-20 each. These examples beg the question; How can dividing tasks between workers result in so many more products produced? Why is it that production of an item from start to finish by one individual is so much lower? There are three primary answers to these questions.

Specialization - Let's go back to the shoe making example as it's easier to understand than the pin making one Smith used. What if some parts of the process of making shoes was somehow more conducive to certain people who have certain characteristics about them? If making shoelaces requires a very intricate and delicate touch, do you think someone with small, thin, nimble fingers would be better at tackling that chore or rather someone with big strong, but clumsy fingers? Probably the delicate ones. What if folding of the leather required great hand strength? In this case, the strong hands would prevail over the delicate ones. What if one or two steps of the process called for a vast amount of training and education about the process? Would someone who has little to no training or education be suitable for these particular tasks? No, they'd only hamper the process, slowing things down greatly. There's a term referred to as specialization that allows for those who have an interest in, training, or innate abilities or talents to take advantage of situations where they may be able to put those assets to good use. It can be said that because of their assets, they have an advantage over others who would attempt the same or similar chore.

Core Competency - When an individual (or company) works one job with a limited scope, they tend to become extremely proficient at it. Think about workers on an automobile assembly line. If one worker were to be trained how to install transmissions and did very well at that job over time, he would be able to make the installations with greater efficiency than if just one person were responsible for transmission installation, windshield installation, as well as dashboard installation. Oftentimes, when an individual is responsible for just one or a limited number of tasks, they learn the best ways to go about performing these tasks as economically as possible, enhancing the organization as a whole.

Economies of Scale - When workers can focus on their jobs and can become more proficient at them, more units are able to be produced. And the more units produced, the more specialization can take place. As production, division, and specialization increases, costs per unit fall. This is what we call economies of scale. As the scale of units of production changes, so do costs. In terms of scarcity, entire societies and nations have benefited from the more efficient methods of production that this concept encourages.